STOCKS : Drexel Troubles Spill Over Into Market; Dow Down 29

Stock prices fell sharply in light trading Monday, weighed down by signs of financial troubles at brokerage house Drexel Burnham Lambert Inc. and by renewed interest rate and recession worries.

The Dow Jones index of 30 industrials, up 45.50 last week, fell 29.06 to 2,619.14.

Declining issues outnumbered advances by more than 2 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 479 up, 1,042 down and 442 unchanged.

Big Board volume came to 118.39 million shares, down from Friday’s 146.91 million and the lightest total since a 77.61-million-share day on Dec. 26.

Stock prices opened lower and then headed sharply downward when rumors began circulating that Drexel, which fueled Wall Street’s merger mania in the 1980s, might be facing bankruptcy. Equity prices then stabilized somewhat when the brokerage said it was seeking a major investor or partner but that its securities unit continued to have good liquidity.

The thin trading tended to magnify the effect of periodic rounds of futures-related selling.

Many traders were idle as banks closed in honor of Lincoln’s Birthday and the Tokyo Stock Exchange was shut down for a local holiday.

Analysts said traders had been encouraged by the results of the Treasury’s auction of notes and bonds last week, which generally went off better than had been expected. That provided some relief from recent worries over rising interest rates.

But many market participants remained edgy over the outlook for rates in other leading industrialized countries.

For several weeks Wall Streeters have worried that rising rates overseas would push U.S. rates higher as well, increasing the chances of a recession.

ASA Ltd. dropped 4 1/2 to 64 3/8. ASA is a closed-end fund that invests in South African stocks, which fell after statements from Nelson R. Mandela, the freed leader of the African National Congress, supporting nationalization of private industry.

Conversely, precious metals stocks not directly exposed to the political situation in South Africa were mostly higher. Homestake Mining rose 1/2 to 23; Newmont Gold added 7/8 to 56 1/8, and Hecla Mining rose 5/8 to 15 5/8.

Share prices also plunged on London’s stock exchange on the Drexel news. At the close, the Financial Times 100-share index was down 26.7, or 1.15%, at 2,286.9.

CREDIT Bond Prices Slump After Strong Week Bond prices also fell sharply as a confluence of factors eroded the strong gains that the credit markets chalked up late last week.

Analysts said continuing concerns about inflation and interest rates, plus a round of profit taking, combined to bring Treasury issues down.

The government’s bellwether 30-year bond tumbled 1-1/32 points, or about $10.31 for every $1,000 in face value. Its yield soared to 8.43% from 8.33% late Friday.

The 30-year bond had shot up 1-25/32 points, or $17.81, Friday.

Analysts said prices fell at the opening of Monday’s trading because of a surge in market interest rates in West Germany. With interest rates on the rise overseas, traders expect the Federal Reserve Board to move U.S. rates higher to keep them competitive with foreign yields.

The early decline spurred traders to take profits, said William V. Sullivan, money market research director at Dean Witter Reynolds.

Robert Brusca, chief economist with Nikko Securities Co. International, said concern about inflation--and the possibility that rising prices would also give the Fed less flexibility with interest rates--took a further toll on prices.

Monday’s announcement by Drexel that it was seeking an outside investor or merger partner also affected bond trading, analysts said.

The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.188%, down from 8.25% Friday.

COMMODITIES Platinum Jumps on Mandela Comments Prices of platinum futures soared after Mandela reiterated a call for a defensive armed struggle against apartheid and for the nationalization of South Africa’s mining industry, sending a shudder of supply fear through the precious metals markets.

On other commodity markets, oil futures fell; coffee futures rose; grains and soybeans were mostly higher, and livestock and meat futures were mixed.

Platinum futures settled $9.80 to $10.10 higher on the New York Mercantile Exchange, with the contract for delivery in April up $9.80 at $523.90 an ounce.

On New York’s Commodity Exchange, gold finished $3 to $3.20 higher, with February at $419.20 an ounce; silver was 2.8 to 3.2 cents higher, with March at $5.305 an ounce.

CURRENCY Dollar Rises a Bit in Quiet Trading The dollar ended narrowly higher against most key currencies in quiet, uneventful trading.

Gold prices rose in New York after a mixed performance overseas.

On the Commodity Exchange, gold bullion for current delivery settled at $419.20 an ounce, up $3.10 from Friday. Republic National Bank in New York quoted a late bid for gold at $418.70, up $2.95.

Currency dealers said the dollar continued to gain ground at the expense of the West German mark. The market remains concerned that a proposal to reunify the monetary systems of the two German states could hurt West Germany’s economy.

However, the markets were slowed by the closure of Tokyo trading houses for a public holiday, dealers said.

In London, the dollar fetched 144.20 yen, compared to 144.72 Friday. Later, in New York, the dollar stood at 144.37 yen, down from 144.725 yen Friday.

The dollar was mixed against the British pound. Sterling bought $1.6960, up from $1.6930 late Friday, and $1.6918 in New York, down from $1.6955.